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February 13, 2004

Comptroller:
New budget must be "cautious" in spending

The budget Governor Pataki and the Legislature enact this
year must break the pattern of recent years and be "cautious
with its expenditures," according to a new report by
state Comptroller Alan Hevesi.

The report, which critiqued the Governor's 2004-05 executive
budget proposal, warned that some revenues assumed in the
proposal may not materialize and spending continues to rise
faster than revenues.

The Governor’s proposal increases the state’s
debt service by nearly $1 billion from 2003-04 and 2008-09,
the report said.

“New York State continues to hold the distinction of
the state with the highest outstanding debt level in the country,”
the report said. “For the next five-year Capital Plan,
debt service will grow by over 50 percent, leaving future
taxpayers with the burden of paying for today’s spending.”

The executive proposal projects $44.2 billion of outstanding
state-supported debt in the next four years, the report said.
That number is a 9.4 percent increase from 2003-04.

“With New York State’s outstanding debt included,
the combined 2001 State and local debt burden outside New
York City in 2001 was $4,173 per capita, an increase of 103
percent since 1990,” the report said.

If New York City’s outstanding debt is added to the
total, the combined state and local debt burden per capita
for 2002 was $7,594, the report said.

The report noted that the budget proposal would increase
school aid by $147 million to $14.6 billion on a school year
basis. But it warned that schools may need an additional $650
million in funding to maintain current programs and services.

“It seems likely that the inflationary and contract
costs experienced by school districts will continue to be
shifted to taxpayers through increased school property taxes,”
the report said.

The report also criticized state leaders for what it said
was higher than needed borrowing for capital spending in recent
years when revenues were strong.

“During the mid-1990s, state pay-as-you-go spending
supported between 35 and 42 percent of state-financed capital
spending,” the report said.

“The state held pay-as-you-go spending constant, while
economic circumstances allowed for a much greater contribution.”

The budget proposal would decrease pay-as-you-go spending
as a percentage of state capital spending from 26.2 percent
to 19.5 percent in 2008-09, the report said.

The state’s pay-as-you-go financing has already declined
in recent years, from 45 to 50 percent in the late 1980s,
to around 30 percent this year.

The Comptroller’s report also listed “risks”
associated with the budget proposal that could “significantly
affect fiscal performance” in the coming year.

“The state is expecting over $1 billion in revenue
from the conversion of Empire Blue Cross/Blue Shield to a
for-profit insurance company,” the report said. “Proceeds
from the conversion would support both budgeted and ‘off-budget’
HCRA programs in SFY 2004-05, but the revenues will not materialize
until pending litigation contesting the conversion is resolved.”